Only two years removed from the financial crisis, could the US be inflating another bubble?
It is a distinct possibility, experts said yesterday as they digested the performance of LinkedIn's initial public offering.
LinkedIn's shares more than doubled in their public trading debut on Thursday, evoking memories of the investors' love affair with internet stocks during the dot.com boom of the late 1990s.
The professional social networking company, which began in one man's living room less than a decade ago, is now worth more than the motorcycle maker Harley-Davidson and the ratings company Moody's Investors Service.
Lawrence Summers, a former US Treasury secretary, said yesterday there was rising concern that technology stocks were in a bubble as investors shook off their apprehension from the 2007 to 2009 US mortgage and credit collapse.
"Who could have imagined that the concern with respect to any American financial asset, just two years after the crisis, would be a bubble?" Mr Summers, who has returned to being a Harvard University professor, said at a conference yesterday in Shanghai. "Yet that concern is increasingly raised with respect to American technology, with respect to certain other American assets. That is a reflection of the resumption of confidence."
The LinkedIn performance even caught bankers by surprise. Bankers typically try to price an IPO so that the stock rises about 15 per cent on the first day of trading: enough to reward investors who made a bet, but not so much that original shareholders feel were short-changed.
Only days ago, LinkedIn proposed a price range for the IPO that valued it at just over US$3 billion (Dh11.01bn). After its first day of trading, it was worth nearly $9bn, adding to concerns that the valuations of social networking companies were exceeding the businesses' earning potential.
"It seems to bring back memories of the tech bubble," said Jack Ablin, the chief investment officer at Harris Private Bank in Chicago. "Based on what I know, it seems like investors are a little overly enthusiastic."
Elsewhere, US farmland prices could also be in a bubble, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, said this year.
"Today there are very substantial risks, to be sure, but the economy is growing, unemployment is falling and financial conditions are normalised," said Mr Summers, who was director of the White House national economic council in the Obama administration from 2009 until last year.
Mr Summers said the "central irony" of a financial crisis was that it was caused by too much confidence, borrowing and lending, and was resolved by more confidence, borrowing and spending. He was Treasury chief from 1999 to 2001, a term that coincided with the collapse of technology shares. The Nasdaq Composite Index fell 39 per cent in 2000.
* with agencies
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Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
Inside%20Out%202
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The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Zayed%20Centre%20for%20Research
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Profile of VoucherSkout
Date of launch: November 2016
Founder: David Tobias
Based: Jumeirah Lake Towers
Sector: Technology
Size: 18 employees
Stage: Embarking on a Series A round to raise $5 million in the first quarter of 2019 with a 20 per cent stake
Investors: Seed round was self-funded with “millions of dollars”
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Match info
Liverpool 4
Salah (19'), Mane (45 2', 53'), Sturridge (87')
West Ham United 0
'Of Love & War'
Lynsey Addario, Penguin Press
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
Details
Through Her Lens: The stories behind the photography of Eva Sereny
Forewords by Jacqueline Bisset and Charlotte Rampling, ACC Art Books